Offshore havens can be best described as a tax haven which is also an offshore jurisdiction. A tax haven is any country or territory which has very low tax regimes or zero taxes in place. The taxes in place havens are lower than that of other countries. An offshore jurisdiction or offshore financial centre on the other hand is a country which caters financial and other types of business to non nationals or foreigners. Most tax havens in the world offer offshore services hence the term offshore havens. The most popular services offered in offshore havens are the incorporation of international business companies or offshore corporation, the formation of offshore foundations, captive, exempt and offshore insurance, electronic gaming, offshore banking services, the formation of offshore trusts, investment fund management and the registration of ships and vessels among other services.
There are certain characteristics which are associated with tax havens. Some of which have gained these countries loads of criticism from international organizations. Offshore tax havens as already mentioned have zero or low taxes. These countries provide strict privacy and confidentiality for their clients which at most times forms part of the country’s legislation. Offshore tax havens which provide banking services also have banking secrecy laws in place. Some examples of offshore tax havens are the following countries; the Republic of Panama, Dominica, The Bahamas, Cayman Islands, Seychelles, Luxembourg, Cyprus, Gibraltar, The British Virgin Islands, Nevis, Anguilla, Belize, Mauritius, Vanuatu, Hong Kong, Singapore, Dubai, Delaware, Costa Rica and the Isle of Man among others.
The number of offshore havens has increased significantly over time. Years ago, offshore havens were primarily used for asset protection by some of the world’s most wealthiest families and individual but of more recent time there have been a shift in how offshore tax havens are used. More people today use offshore havens for conducting business due to the many benefits that can be derived from the tax havens. Offshore tax havens are also used to reduce taxes.
Most offshore tax havens have no form of taxation in place for offshore companies who gain their income outside of the offshore jurisdiction. Income such as interest earned, profits, dividends among others as long as they are earned outside of most offshore jurisdictions is not taxed. There are jurisdictions which have low taxation on globally earned profits. This includes countries such as Barbados. The pure offshore tax havens will have none of the following taxes in place; corporate taxes, income taxes, inheritance tax, withholding tax, capital gains tax, estate tax, gift tax. International Business corporations incorporated in offshore havens are obligated to pay annual license fee to the government of the country of incorporation. The license fees in some tax havens are fixed while in some, this is determined by the authorized share capital of the offshore business company.
Offshore havens orchestrate the legislation governing offshore companies with means of protecting the companies and shareholders. In offshore tax havens such as Dominica it is a criminal offense for a registered agent, an employee of the Public Registry or any other person who is directly involved with an offshore company to give out confidential information about the company. Anyone who knowingly gives out information to third party will be charged and is liable to serve prison time.
Offshore business companies in most offshore tax havens are not legally obligated to present annual financial statements or accounting records to any authority in the tax havens. This means that the financial information of these companies remains private. Further privacy is provided for the beneficial owners of offshore companies; most tax havens allow offshore companies to be registered with nominee directors and shareholders. The use of nominees ensures that the name of the rightful owners does not appear as public records at the Registrar of Companies. In some tax havens the names of the beneficial owners need not be submitted to the Registrar of companies.
Offshore banking is one of the features of an offshore haven. The offshore tax havens of the world provide clients with secure environments in which to bank. A further benefit to offshore banking in tax havens is that banking is done in a tax free environment. Interest accumulated on offshore bank accounts in offshore havens is tax free. Offshore banks in the tax havens provide modern banking to clients which include banking via telephone, fax and fax, Some offshore banks have sophisticated banking software which enables clients to get into their bank’s system.
One of the most prominent attributes of offshore havens is their ability to provide banking secrecy for offshore bank account holders. Banking secrecy in many tax havens forms part of legislation. Banking Secrecy laws were first passed in Switzerland and since then many tax havens have adopted them to make themselves more attractive to offshore clients. The essence of banking secrecy laws is that information in offshore bank account is very private and confidential. Employees, agents, and persons associated with offshore banks who give out information about offshore bank accounts are liable to pay monetary fine and serve jail time. According to banking secrecy laws information in an offshore bank account can only be given out with the written consent of the offshore bank account holder. Offshore bank account information may also be given out if a court order has been handed down in cases of criminal investigations. Some offshore havens have their bank employees sign oaths which bind them to maintain banking secrecy.
Offshore havens are accessible to people from all over the world and provide a legal avenue which they can use to reduce their tax liability and increase capital and investment opportunities. Offshore havens provide excellent asset protection and safe means of estate planning and tax planning. Generally, offshore tax havens are countries with very stable political and economic systems with very good infrastructure and communications in place. The offshore havens available today are very competitive and modern also providing efficient and professional services.